PEST Analysis
A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors:
• Political
• Economic
• Social
• Technological
The acronym PEST (or sometimes rearranged as "STEP") is used to describe a framework for the analysis of these macroenvironmental factors. A PEST analysis fits into an overall environmental scan as shown in the following diagram:
Environmental Scan
/ \
External Analysis Internal Analysis
/ \
Macroenvironment Microenvironment
|
P.E.S.T.
Political Factors
Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. Some examples include:
• tax policy
• employment laws
• environmental regulations
• trade restrictions and tariffs
• political stability
Economic Factors
Economic factors affect the purchasing power of potential customers and the firm's cost of capital. The following are examples of factors in the macroeconomy:
• economic growth
• interest rates
• exchange rates
• &n ...